Industry hints at tough times ahead as ZWG yearly inflation hits 85%

By Alois Vinga

THE Confederation of Zimbabwe Industries (CZI) says current ZWG inflationary trends are not going hand in hand with market interventions, hinting at tough times if combative measures are not employed on time.

The industry lobby group has also blamed the decision taken by authorities, which resulted in devaluing the ZWG currency, for triggering the high local currency yearly inflation rates.

The Reserve Bank of Zimbabwe (RBZ) embraced the ZWG currency in April 2024, presenting it as the country’s final solution to decades-long currency problems. On inception, the RBZ governor, Dr John Mushayavanhu, described the ZWG as both a minerals and foreign currency reserves-backed currency.

About five months later, the ZWG had suffered heavy market bruises against the US$ on both the parallel and formal market, forcing the central bank to order a 43% devaluation overnight.

In its latest inflation tracker, CZI decried the April 2025 ZWG annual inflation rate of 85,7 %, which was blamed on the RBZ’s devaluation directive.

“The high ZWG inflation largely reflects cumulative shocks that drove month-on-month inflation in 2024. A significant factor was the September 2024 exchange rate devaluation, which substantially increased the ZiG Consumer Price Index (CPI) and, in turn, elevated annual inflation compared to April 2024 levels,” the industry grouping said.

The high ZiG annual inflation, CZI said, poses challenges for businesses, particularly due to its impact on interest rates. To achieve a positive real interest rate, lending rates would need to be set around 85%, making borrowing difficult for businesses.

“Conversely, interest rates below the inflation rate may encourage speculative borrowing. Effective monetary policy will require a delicate balance to mitigate these adverse effects,” said Industry.

The business grouping said that as a result, the parallel market premium started showing an upward trend on the 17th of April 2025 as the ZWG depreciated on the parallel market despite still being stable on the official market.

By comparing the period 01 to 29 March 2025 with 01 to 29 April 2025, CZI contends data shows that the premium has slightly increased from an average of 25% to 28%, respectively.

“An increasing parallel market premium distorts price signals to both businesses and consumers. The recent announcement that gold coins are now available was expected to absorb any pressure for ZWG to depreciate, as holders of ZWG can realise a higher value from buying gold coins at a time when gold prices are increasing.

“Thus, the expectation was that the parallel market premium would actually shrink rather than increase,” the industry added.